Both the U.S. Department of Justice and fans of Midwest Airlines agree that a proposal to sell the carrier is worth a long look, although for different reasons.
Earlier this month, agency investigators made a second request for information as they determine whether the deal poses a threat to competition. TPG Capital, a private equity firm, is teaming up with Northwest Airlines to buy the Milwaukee-based carrier for $451 million.
For Milwaukee residents, their concern focuses more on making sure things don't change at the airline known for its customer service, including leather seats and chocolate chip cookies that are baked on board.
While Northwest is now in the middle of an antitrust review that could take longer than first anticipated, it does have one thing that's working in its favor with Milwaukee locals: It's not AirTran Airways.
For more than 18 months, low-cost carrier AirTran pursued a hostile bid for Midwest Air Group Inc., the parent company of Midwest Airlines. AirTran flies out of Milwaukee's General Mitchell International Airport, but is a relatively small player there. It wanted to emerge as a national, low-cost carrier by acquiring Midwest and its 53-city service grid.
But Midwest executives weren't interested in merging with a low-cost carrier. In August, Midwest decided to sell to the team of TPG - the private equity firm - and Northwest Airlines.
If AirTran's interest had never surfaced, and Northwest had been the first airline to line up as a suitor, Northwest might have faced a tougher battle to win over the public, said Scott Walker, the top administrator in Milwaukee County, which runs the airport.
"But because it was viewed as a better alternative to AirTran taking them over outright," he said, Northwest's involvement probably received a more favorable reaction. During the AirTran bid, Midwest executives had said that 700 of 1,865 airline jobs at the airport could potentially be eliminated if AirTran won control.
Last week, Midwest investors approved the sale of the airline to TPG and Northwest. Northwest is investing $213 million for a 47 percent ownership stake in the new, private parent company. The antitrust approval, though, is a separate issue.
In a recent research note, an analyst with Robert W. Baird investments noted that second requests from the Justice Department are uncommon, issued in less than 3 percent of deals that get antitrust scrutiny.
The request "suggests the transaction may not close until next year," wrote Craig Kennison, the Baird airline analyst.
A second request can get "very burdensome and very expensive" for the companies seeking approval, said William D'Amico, an attorney with the Chadbourne & Parke firm in Washington, D.C. "They tend to get into the nuts and bolts of the entire transaction and the marketplace."
Northwest's paperwork on the second request should be done shortly, Ben Hirst, Northwest's senior vice president of corporate affairs and administration, said last week. He said Northwest isn't particularly worried about the antitrust scrutiny.
Northwest says that its investment in Midwest is passive - it won't have any say in management, nor a seat on the board of directors.
In a statement issued in August, Northwest also said it will have the right - but not the obligation - to acquire TPG's interest in Midwest in certain circumstances.
"How passive does Northwest have to be for this to fly?" said Michael Waxman, a law professor and antitrust expert at Marquette University Law School in Milwaukee. If Northwest owns a piece of the new, private Midwest and has a preferred spot in line to eventually buy out TPG, "that's incredible power," Waxman said.
Midwest said late Thursday that TPG will pay $17 per share, beating out AirTran Holdings Inc.'s offer that had been raised several times.
Hostile offer raised to $445 million.
New offer made for Midwest
Airline agrees to $17-a-share deal; AirTran accept's board's decision